You may have heard that one of the largest business peer to peer (P2P) lenders, Funding Circle has pulled out of development finance. It’s not just development, they are pulling out of the property sector altogether. While they are honouring current business, new enquiries or those applications that are not formally under way are now without a home.
If you are in this situation then I urge you to call. We would be more than happy to add you to our satisfied client base and fund this and future projects for you. The best number is 01492 233 505, call me, Tim, anytime.
This is not an article intended to attack Funding Circle, or similar P2P companies. Their core offering, unsecured lending to business, is potentially a great way to borrow. From conversations over the last few years with various business development managers, it seems to be their skill and an option to be considered for all borrowing money for their business.
It does, in my opinion, highlight the need for borrowers to make sure they are dealing companies that are suited to their needs. One loan is not the same as another and, particularly where developments are concerned, I think it is vital to deal with a lender that has a track record, the experience to help you and a commitment to the sector.
Recent years have seen a huge number of lenders becoming involved in development project financing. Contrary to what many believe, there is plenty of money in the market for developers as long as the project makes sense. Even if a borrower is looking for a lender to provide 100% of all costs, there are options available.
The result of increased competition generally means lower costs, better service and therefore a great benefit for the client. From talking to our clients I am not sure that is actually the case in our niche of the finance industry.
Many of the lenders that now fund developers have a background in bridging or business loans, which is a different sort of finance. Bridging tends to be a lump sum, used to buy a property or pay off a bill, for example, to be paid back within a short period, typically 6 months. Business loans are underwritten on accounts and balance sheets, as well as plans and experience of the business owner. Underwriting a development project is much more involved.
I wouldn’t be surprised if they weren’t the only one of this new breed of lender to walk away from development finance and possibly all property lending.
Unlike other sorts of finance, developments need to be monitored on a regular basis, and the underwriting is more nuanced than a simple credit score or maths calculation.
It’s not that easy.
There are so many things that can go wrong in a build, even for the most experienced. When issues come up it is vital that you are funded by a lender that can work with you and adapt to the new circumstances, in such a way that your project continues to progress, giving you confidence that you will have the draw downs when you need them.
What happens if the lender you are with decides that they don’t want to be involved in developments anymore – where will that leave you?
Terms from certain lenders can seem to be incredibly attractive, with low rates and fees. It can be tempting and it’s not surprising when borrowers have their heads turned.
The cheapest option is rarely the best in life. Development finance should be looked at in a similar way – is it worth paying that bit more for the best service and experience?
By using Richmond Securities you get the benefit of working with a lender that has funded projects for over 15 years. As you can imagine in that time we’ve built up (pun intended) a fair amount of experience, we’ve honed our process and learnt what our clients want from a lender.
We are determined to give you the best service possible, to make sure you get draw downs quickly and when something does go wrong we work to make sure it doesn’t cause the whole project to fail.
In short, we have been funding projects, developers and builders for long enough to know we don’t want to do anything else. With that in mind you can be sure that we won’t be pulling out of the market any time soon.
Let’s talk about how we can work together on your next scheme – 01492 233 505.